How Zimbabwe drifted to basket case

In 1980, after the liberation struggle, we inherited the jewel of Africa, but three years later in 1983, the economy started showing signs of recession. But no one could quickly notice the dire situation the country was entering into, until 1990 when the economy collapsed. It is reported that the country is naturally endowed with vast amounts of precious resources that if extracted and put to good use, Zimbabwe would experience growth miracles.

guest column: Blessing Machiva

Many people then wonder what went wrong and where are we currently failing as a nation to revive this country to its former growth trajectory. Despite Botswana’s vast land being a desert and without any significant resource deposits except diamonds, the country is doing so well in terms of growth and development. So then, where is our problem as a nation?

Poor countries are poor because those who have the power make choices that create poverty. They get it wrong, not by mistake or ignorance, but on purpose.

The problem is our institutions, economic and political, which are extractive in nature unlike being inclusive. Institutions are ‘rules of the game’. Political institutions regulate the limits of political power and these determine how political power changes hands, and these include the Constitution, electoral rules, constraints imposed on the powers of the Executive by other branches of the State, among others. Political power is the ability to change economic institutions or undertake redistribution of income and assets.

Economic institutions then determine the economic rules of the game, in particular the degree of property rights enforcement, the set of contracts that can be written and enforced, and some of the rules and regulations that determine the economic opportunities open to agents.

Extractive political institutions concentrate power in the hands of the few elite and place few constraints on the exercise of this power. Economic institutions are then often structured by these elite to extract resources from the rest of the society. Extractive economic institutions thus must inherently be dependent on extractive political institutions for their survival.

Those who took over power from the colonialist regime set up rent-seeking institutions that do not maximise the total surplus of the whole group but of the elite alone.
In Zimbabwe, there is persistent tension between the ownership structure which maximises the rent of the ruler and his group and an efficient system that reduces transaction costs and encourages economic growth.

The problem with these extractive institutions is that too much power concentrated in the hands of the elite or the ruler places few constraints on the exercise of this power and would discourage investments by the whole populace. Economic institutions are structured by these rulers to extract resources from the rest of the society. We have seen these authorities spending unnecessarily on trivial issues at the expense of productive channels. How would one justify the expense of these globe-trotting journeys that have brought nothing, but empty promises from the fed-up international community and the hiring of private jets for single individuals for their luxurious travels?

After excessive spending, these elite rulers would then come to the already poor public in the form of excessive taxation and tell them to swallow the pain, but when it comes to luxurious expenditure, they do it alone. These taxes are a form of diversion and expropriation, confiscatory taxation and corruption are examples of public diversion and these deter investment and suppress productive efforts.

Under extractive institutions, there is no democracy, no protection of property rights; the property of investors will be highly insecure, massive use of coercion and the agents are not free to make economic decisions. The fast-track land reform programme was marred with violence, brutal attacks and looting of the white farmers’ properties, and this made investors to feel insecure in this country. As much as many would think this programme was meant to address inequalities in resources ownership, however, it was a way of further enriching the elite, as they grabbed more land as they could, even up to seven farms per person. Indigenisation policy followed and investors were frustrated until they gave up the little remaining investments in the country and only the elite benefited whilst the rural populace was busy supporting the looting at all the countryside rallies.

Our bureaucracies lack procedural clarity and technical competence, and are very inefficient in the determination of government policies and the allocation of public goods. The bureaucracy awards contracts, business and trade licences, police protection on partisan grounds rather than technical efficiency. Corruption is higher in these bureaucracies and competence very low, and they protect less against infringements on property rights. The resulting distortions in investment and trade reduce the quantity and efficiency of capital investments and foreign technology introduced into the economy. How can one explain the four years (1994-1997) that took Econet to obtain a license to operate here in Zimbabwe?

We have seen government tenders being selectively awarded to certain individuals and the nation losing millions of dollars after they fail to deliver and no arrests are made.

There are government officials who corruptly took people’s wealth, promising to deliver residential stands, but then failed and were generously rewarded with top posts in the ‘new dispensation’ and no law was applied on them.

This is a clear indication of the lack of rule of law, contract repudiation, corruption and lack of contract enforcement, which are the major causes of the nation’s failure. How do you expect the public to listen or take seriously whatever is said by such corrupt government officials? We are really playing with time under this disguised regime, otherwise there is no change that will come.

The same institutions that allow public officials to demand large and arbitrary bribes, such as a failed law enforcement system, also inhibits those officials from credibly pledging not to renege on their future commitments. This discourages investments and encourages other forms of economic activity that are less vulnerable to expropriation. Secure property rights encourage fixed investments, but expropriation threats deter investments or make entrepreneurs invest in less specialised capital, which can be moved easily from one activity to another or concentrate more on trading unlike manufacturing.

This explains why a lot of foreign investors are sceptical of setting up manufacturing units here in Zimbabwe and only concentrate on retailing. This has static efficiency effects and also discourages dynamic gains from innovation since innovation is most likely to thrive when specialisation is encouraged.

Political instability such as coups, revolutions and political assassinations, political freedoms and civil liberties are the set of variables that capture only incompletely many of the relevant threats to property and contractual rights. Then one wonders which middle-income economy is this so-called ‘new dispensation’ talking about when there are massive irregularities.

The public media is very biased in favour of the ruling party when such should serve an important role in monitoring those in authority and holding them accountable for their actions. One wonders what type of media would report obvious lies: ‘Zimbabwe has enough fuel’ when queues are so evident everywhere, with agents wasting productive time.

There is also a significant degree of State capture in Zimbabwe whereby the elite spend a lot of their productive time influencing the government, lobbying legislators and agencies to provide benefits to their clients, and designing policies that favour their businesses.

The major reason behind the failure of National Railways of Zimbabwe (NRZ) is because we have a lot of these policymakers who are into haulage truck transport business, hence reviving the NRZ would mean less, if no business to their companies hence such plans are sabotaged. At lower levels, they use litigation to extract value from private individuals. We have heard of certain ‘cartels’ that control fuel supplies here in Zimbabwe and another one that has been providing the market with bond notes to purchase US dollars from the streets, and even if such individuals are known, no arrests are made, only unnecessary and never ending talks at countryside rallies to rural people who do not even know anything pertaining the current economic environment.

Excessive use of force, oppression and coercion is counter innovation and such practices pose a threat to property rights. Demonstrations, strikes and criticisms are made illegal so that agents do not express their feelings. The recent strike by medical doctors has been deemed illegal by this oppressive regime and it’s not long when hundreds of nurses were fired for displaying their displeasure against the government’s massive use of unconstrained political power. Even if these workers are to continue supplying labour, but because they are full of frustration and anger, shirking is dominant, hence productivity is reduced.

This explains why poor countries like Zimbabwe invest heavily in security, a larger chunk of the budget goes to defence during the time when our major enemy is an ailing economy not war at the expense of industries, education and health.

Employment has been for a couple of times stopped in the education and health sectors, but not in the military and police, they hire thousands every year. During a time the country is facing foreign currency shortages, vehicles for the police force are bought instead of ambulances or productive capital equipment.

Education is used to inculcate propaganda, instead of focusing more on the collapsing economy, you are told of the historic liberation struggle stories so that you see them as more important. Learners are encouraged to be patriotic so that they won’t have a mind of revolting against the oppressive and failed regime in future.

How many people have died in Zimbabwe under this regime due to accidents because of the poor state of the roads? Haulage trucks, instead of using rail to transport heavy cargo; cholera; Aids due to prostitution in order to survive; curable diseases due to lack of proper medication and poor health facilities, stress, hunger, domestic violence, among other things? They are many and a person only has one chance to live; it pains a lot.

It can then be argued that the authorities are clueless on how to revive this economy.

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